A recent report by Per Capita, an independent progressive think tank in collaboration with the National Disability Services (NDS) has discovered the economic benefits of the National Disability Insurance Scheme (NDIS) for people with disabilities equates to excellent economic return on investment with employment and growth strong for people with disability.
The report combats the misconception of the NDIS being an “unsustainable, cost blowout and burden” argument used by the Federal Government against the NDIS. The Executive Summary of the report is attached below.
The NDIA’s Annual Financial Sustainability Report of December 2020 (AFSRDec20) made waves in the disability support community when it was released earlier this year. It contains modelling stating that over the coming five years the participant costs of the NDIS will be $50 billion more than previously assumed. By 2029-30, the AFSRDec20 modelling suggests an annual overshoot as high as $22 billion; a 54% increase in costs.
Given that the NDIA’s 2019-2020 Annual Report found that NDIS costs were largely in line with previous modelling, many stakeholders question how such a sharp change in forecasts could have come about. There is also widespread concern in the disability community that political desires to cut back on NDIS funding may be influencing some of these figures.
Unfortunately, the situation is compounded by a lack of access to details about the modelling, with the Minister for the NDIS, Linda Reynolds, unwilling to provide to the public the underlying data or modelling assumptions. Following an FOI by Kevin Andrews MP, partial access to the underlying data has been provided. However, without full access to the modelling used to reach such shocking figures, an independent assessment of the NDIA’s claims cannot be made.
Could the blowout be as high as the new modelling suggests? In theory, yes. Novel large-scale projects are notoriously difficult to cost. History is replete with examples in both the public and private sector. Take for example, Chevron’s Gorgon LNP project ended up US$17 billion more than the original US$37 billion, while the Department of Defence has seen their 26 largest projects increase in cost by 60% with a cumulative 57-year delay.2
But it seems likely that the NDIAs new modelling overstates the increase in participant numbers and overall costs compared to previous estimates. And unlike the examples above, any increase in cost of the NDIS will translate very quickly into strong economic gains, through high levels of increased employment and local level economic activity dispersed throughout local communities.
This is because spending on the NDIS is not simply a cost on one side of a ledger; it is also a critical component of the service economy, directly creating tens of thousands of jobs and billions in economic activity, producing vast positive spill overs. The original Productivity Commission report in 2011presented a very compelling argument that the NDIS would produce large economic returns, but this side of the NDIS is consistently under reported and poorly enumerated.
The multiplier effect, that is the total amount of direct and indirect economic activity stimulated by the initial investment, associated with health and social care spending is extremely high, and any sub-optimal underinvestment removes from the economy far more than is “saved” in Federal coffers. This report discusses, where data is available, some of the issues surrounding the new NDIA modelling (Section 1). It then goes on to assess the broad economic activity generated by the NDIS, including employment and consumption (Section 2), and the potential costs of limiting NDIS spending at sub-optimal levels (Section 3).
We estimate that:
1. The NDIS employs over 270,000 people over 20 different occupations, and contributes to the employment of tens of thousands more workers indirectly;
2. The economic impact of the scheme is likely very large, even compared to other types of government spending. A conservative estimate of the multiplier effect of the NDIS would be in the range of 2.25; and
3. Such a multiplier effect would mean that the economic contribution of the NDIS in 2020-2021 is around $52.4 billion.
Because the NDIS has such a strong impact on employment and in generating economic activity, underfunding the scheme has significant costs. We estimate that for every $1 billion that the NDIS is under-funded, significant negative outcomes occur across the economy including:
1. A drop in employment of around 10,200 jobs, reducing the employment rate by 0.1%;
2. A decline in total economic activity of $2.25 billion; and3. 0.14% reduction in total GDP, or a 0.22% reduction in the services economy.
The consequences of underinvesting in the NDIS would be disproportionately born by women, carers and people living with a disability. The ‘affordability of a crucial service is inevitably a question to grapple with. If a service is essential, placing a dollar figure against what we as a nation are willing to pay for it can seem perverse.
However, with limited budget resources, decisions over allocation must be made. It is essential that these contested decisions are based on sound, transparent and publicly-available analysis, not made behind closed doors based on secret modelling.